Untitled Document

AirAsia on the move - to Jakarta and Singapore

Posted on 26 May 2011 at 09:01 am by Corinne Wan

So AirAsia has finally decided to move its regional head office out of Kuala Lumpur to Jakarta and set up a base in Singapore. Surprised? I asked a few travel industry friends when we heard the news.

Response? Not really. “It’s just a question of where and when,” they said, “though Jakarta as the regional base seems a surprising choice, as we would have thought AirAsia would have chosen Singapore as its HQ and a base either in Jakarta or Bangkok.”

But Jakarta does seem a logical choice to me as the region’s largest low cost carrier could tap into the vast Indonesia market with over 230 million people, 10 times Malaysia’s population, and about17,000 islands.

According to online news portal Malaysia Insider, which reported on the Jakarta move quoting sources, "the relocation will not have an impact on operations here but is seen as a blow to Malaysia’s aim of being a regional aviation hub.This is especially so as the Malaysian government is already building a new low-cost carrier terminal for AirAsia, expected to be completed by April 2012."

The Jakarta shift is slated for later this year. Seems AirAsia’s communications chief, NV Raman, is already in Jakarta to set up the office. Although AirAsia confirmed the move, it has yet to officially announce it. Reports said that Cengkareng Soetta Terminal 3 will be dedicated to AirAsia come October this year..

In fact tongues were already wagging a day before the news on Jakarta broke when Dato’ Seri Dr Tony Fernandes (pictured right), AirAsia group CEO, announced that AirAsia would be "night-stopping" aircraft in Singapore and setting up a base on the island republic.

With a base in Singapore expected to open before September, AirAsia will be able to operate early morning and late-night flights as part of a move to grow market share for flights operated out of the island republic. The airline has placed advertisements for Singapore-based pilots and cabin crew.

It is an open secret that AirAsia has not been too happy with the delays in granting it and affiliate company AirAsia X, the long haul low cost carrier, regional and international routes, and hiccups in getting some deals through. So moving headquarters and setting up base in another country may make AirAsia and AirAsia X realise their dream of becoming truly global.

The news have been greeted with both criticism and praises. Some condemned AirAsia for deserting the country of its birth "after all the talk about making Malaysia the regional hub, but in the end AirAsia is still just a business and its shareholders prefer optimisation of profit rather than national pride".

There were however voices of reason citing the decision as "just business". As one Malaysia Insider’s reader going by the name of "Kiwi in Malaysia" wrote: "Wanna go to a Western country and see all the businesses that have up and moved to cheaper Asian countries, taking their jobs with them? …. We don't go round calling them 'traitors' or other puerile names. Business is business …", adding that it hurts to see a home grown business relocate to a neighbouring country, "but if that leads to the survival and prosperity of the business, who can argue?"

To be fair AirAsia’s move to Jakarta is not a new phenomenon as a number of Malaysian businessmen have moved their assets overseas notably Genting Bhd and Robert Kuok's Wilmar relocating to Singapore, Ananda Krishna with vast investments in Australia and Europe and YTL’s billion dollar assets in Singapore, UK and Australia.

Whatever the reasons for AirAsia to warrant a shift of its headquarters from the country where it was “born” in 2003 and take most of its business to another country will be an ongoing debate for some time.  But one thing is sure, AirAsia is gearing for strong growth and it will move to wherever the opportunity is there for it to grow fast and unhindered.

And Indonesia’s expanding economy, its openness to investors and its vast numbers of cities, towns and resort islands that could provide AirAsia with a strong domestic network and linkages to foreign destinations, are as good reasons as any.

I have watched AirAsia from its beginnings, from an airline with a few aircraft to what it is today with affiliates in AirAsia X, its long haul arm, equity in Thai AirAsia and Indonesia AirAsia, and joint-ventures in VieJet AirAsia and AirAsia Philippines.

As Fernandes said at the presentation of the airline first quarter 2011 financial results earlier this week, the group would continue to adopt a "laser-like focus" on keeping costs down for the rest of this year, as it seeks to push load factors higher on key profitable routes and capture further market share from competitors.

AirAsia’s fleet size has also grown considerably, with 105 aircraft to date, another 122 on order and 63 options. It will take delivery of three A320 aircraft in Q3 and four in Q4 of the year. Of these three will be deployed in Malaysia, two in Thailand and two in the Philippines. It will take delivery of 12 planes next year, of which four will be to Malaysia.

The airline’s simple policy of charging low airfares to enable everyone to fly has endeared it to the hearts of many Malaysians, including mine. It is with a tinge of sadness that many of us receive the news of its impending shift of the core of its operations to Indonesia. But guess AirAsia has to go where it can grow unhindered.

All I can say, and I am sure many of my fellow Malaysians share the same sentiment, is that AirAsia’s move to Jakarta, together with key staff, is Malaysia’s loss and Indonesia’s gain.

Tags: AirAsia , regional headquarters , Jakarta , Malaysia , Indonesia , Tony Fernandes , low-cost carrier terminal , AirAsia X , Thai AiAsia , Indonesia AirAsia , VieJjet AirAsia , AirAsia Philippines.